Not that any more proof was needed but here it is: Sumner said something that kind of sounds anti RBC. That's all we need. Anything Sumner says we just accept en toto with no misgivings at all. Otherwise we sound like conspiracy nuts who are making wild claims.
"Imagine one of the great controversies in physics (say string theory) could be settled with a particle accelerator that cost $500,000 to build. But the physics profession was too lazy to ask the NSF for the money. Replace string theory with the debate over demand-side vs. RBC models and you have described economics circa 2014."
http://www.themoneyillusion.com/?p=26148
Yes, and I have a new marketing suggestion: let's have a pet rock. What you don't think this will sell? How can you know until you try? It's impossible to know if NGDP futures works until we try. Though we have some reason for skepticism perhaps.
http://diaryofarepublicanhater.blogspot.com/2012/07/now-its-scott-sumner-vs-mike-sanowski.html
http://diaryofarepublicanhater.blogspot.com/2012/07/ngdp-targeting-are-expectations-enough.html
I like how Sumner added an extra touch: he seems to question microfoundations.
"My musical chair model doesn’t have the “microfoundations” that have been fashionable since the 1980s. But which model with microfoundations can outperform the musical chairs model? Indeed let’s make the claim more policy-oriented. I claim that fluctuations in predicted future NGDP relative to the trend line strongly correlate with changes in future unemployment. And of course NGDP futures prices are 100% controllable by the monetary authority."
I don't get why anyone would accuse Sumner of tautologies, do you?
P.S. Microfoundations in truth were the invention of Sumner's mentor, Robert Lucas-along with a few others of course, Tom Sargent, etc. Their real purpose is to kill Keynesian economics from within-by Keynesian I mean macroeconomics as such. They want to return us to the age of pre-Keynesian methodological individualism-ie, 'microfoundations' with no Macro at all. Making Macro answerable to Micro but not the other way around was an impressive step on their part.
"Imagine one of the great controversies in physics (say string theory) could be settled with a particle accelerator that cost $500,000 to build. But the physics profession was too lazy to ask the NSF for the money. Replace string theory with the debate over demand-side vs. RBC models and you have described economics circa 2014."
http://www.themoneyillusion.com/?p=26148
Yes, and I have a new marketing suggestion: let's have a pet rock. What you don't think this will sell? How can you know until you try? It's impossible to know if NGDP futures works until we try. Though we have some reason for skepticism perhaps.
http://diaryofarepublicanhater.blogspot.com/2012/07/now-its-scott-sumner-vs-mike-sanowski.html
http://diaryofarepublicanhater.blogspot.com/2012/07/ngdp-targeting-are-expectations-enough.html
I like how Sumner added an extra touch: he seems to question microfoundations.
"My musical chair model doesn’t have the “microfoundations” that have been fashionable since the 1980s. But which model with microfoundations can outperform the musical chairs model? Indeed let’s make the claim more policy-oriented. I claim that fluctuations in predicted future NGDP relative to the trend line strongly correlate with changes in future unemployment. And of course NGDP futures prices are 100% controllable by the monetary authority."
I don't get why anyone would accuse Sumner of tautologies, do you?
P.S. Microfoundations in truth were the invention of Sumner's mentor, Robert Lucas-along with a few others of course, Tom Sargent, etc. Their real purpose is to kill Keynesian economics from within-by Keynesian I mean macroeconomics as such. They want to return us to the age of pre-Keynesian methodological individualism-ie, 'microfoundations' with no Macro at all. Making Macro answerable to Micro but not the other way around was an impressive step on their part.
Ha!... when I read that on Sumner's I was going to come over hear and point that out actually, but I decided to give it a rest. Well it's good you've finally come around to seeing things my way Mike. ... er... hmm, ... wait, do I detect a note of sarcasm?? ;^)
ReplyDeleteBut seriously, this is nothing new right? He's essentially saying that RBC is bad monetary economics because they refuse to acknowledge the evidence that the demand side really matters. He's pointed out before that in fact the whole of the right wing of econ seems to be refusing the acknowledge now that a drop in AD can be a problem (not just with RBCers, with other more "respectable" economists). There are some recent articles on this... guys that had previously written papers on the problem of a drop in AD now seem to mock the idea if they bring it up at all, and he's speculating this could be a case of essentially getting on board with the "correct" talking points for the audience they're addressing, which doesn't like to hear about the demand side.
"There are some recent articles on this..." ... that Sumner wrote.
DeleteMike, I thought you mike like this David Glasner post on sticky wages:
ReplyDeletehttp://uneasymoney.com/2014/02/06/why-are-wages-sticky/
What he brings up here ties into my note about how Sumner has pointed out that otherwise normal mainstream respectable (but conservative) economists have decided to imply that to suggest that aggregate demand shortfall is a problem is borderline crazy (though they themselves have written about AD in the past!).
In this case Glasner points out a role reversal between the new Classicals and new Keynesians (as contrasted with classicals and Keynesians, resp.) on the subject of sticky wages:
"So it’s really quite astonishing — and amusing — to observe that, in the current upside-down world of modern macroeconomics, what differentiates New Classical from New Keynesian macroeconomists is that macroecoomists of the New Classical variety, dismissing wage stickiness as non-existent or empirically unimportant, assume that cyclical fluctuations in employment result from high rates of intertemporal substitution by labor in response to fluctuations in labor productivity, while macroeconomists of the New Keynesian variety argue that it is nominal-wage stickiness that prevents the steep cuts in nominal wages required to maintain employment in the face of exogenous shocks in aggregate demand or supply. New Classical and New Keynesian indeed!"
:D
I read the post by Glasner which was very interesting. On Sumner we disagree on a few things. For one thing I don't necessarily believe I have to take him at his word as certain things he's said makes me suspcious of his word.
ReplyDeleteHere though you're right but leave out one thing:
"He's essentially saying that RBC is bad monetary economics because they refuse to acknowledge the evidence that the demand side really matters. He's pointed out before that in fact the whole of the right wing of econ seems to be refusing the acknowledge now that a drop in AD can be a problem (not just with RBCers, with other more "respectable" economists). There are some recent articles on this... guys that had previously written papers on the problem of a drop in AD now seem to mock the idea if they bring it up at all, and he's speculating this could be a case of essentially getting on board with the "correct" talking points for the audience they're addressing, which doesn't like to hear about the demand side."
I understand that he-and Monetarists in general-disagree with how other conservatives deny the demand side. However, he still, at the end of the day agrees with these conservatives on 99.9% of nonmonetary issues-that is to say fiscal and political matters. He just thinks that starting with demand side problems is the best way to get to where they all want to be-a Neoliberal paradise.
http://diaryofarepublicanhater.blogspot.com/2014/01/yes-scott-ive-rejected-neoliberalism.html
Again, as I've said many times before I know that he disagrees with them on monetary matters. What I always add is that he agrees with them on fiscal matters and I disagree with you that this is peripheral to his Market Monetarism agenda-though it's meant to appear so by design so folks like you only seem to hear Scott humming 'Kumbaya."
What he's really saying is that conservatives would be smart to follow him with MM, that they'd have a much better chance at achieving their conservative goals-small govt. deregulation, low taxes on the rich, high for the poor, etc.
I might add that while Sumner thinks the demand side matters he 1) Seems to think the monetary base = demand and 2) That the Fed can control demand to a very fine degree by targeting the prices of all goods sold (which is essentially what NGDP is) So his definition of demand isn't what most Keynesians would use.
DeleteHi Greg: I'm not sure that monetary base necessarily = demand, even in an MM universe. The reason I say that is because Nick Rowe recently did a thought experiment about a world in which the CB controls two interest rates: the IOR (which he called Rm) and the FFR (which he called Rb). He pointed out that to a monetarist such as himself, the only thing that's of macro-economic importance here is Rm, because that directly controls the "demand" for the MOA. The CB could set Rb according to some "law" (like a Taylor Rule), or choose not to set it and let it float, or even to outlaw lending altogether (Islamic style) and it wouldn't have any macroeconomic (i.e. long term) significance, because to an MMer, all you need to do is offset any nominal/monetary shocks to AD by adjusting the AD control, which could be Rm or it could be the quantity of base money. Either way. I'm not saying I agree, but that's the msg I got (and Nick basically confirmed that in a follow up answer).
Deletehttp://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/two-interest-rates-and-a-simple-question.html
So, sorry about the quibble, but I just wanted to point that out.
Mike, you write:
Delete"He just thinks that starting with demand side problems is the best way to get to where they all want to be-a Neoliberal paradise. "
This from Sumner's FAQ (it's one of the only funny things I've seen Sumner write actually):
"20. Aren’t you just a monetary crank trying to solve all the world’s problems by printing money?
Yes, but like a broken clock the monetary cranks are right twice a century; 1933, and today. The other 98 years I am a Chicago-trained, libertarian, inflation-hawk. Twice a century I put on my Irving Fisher super-hero suit, and emerge from my deep underground bunker."
... so I wonder: does that mean that twice a century you've got to pay attention to the demand side?
Hey Tom
Delete" I'm not sure that monetary base necessarily = demand, even in an MM universe"
I think its true to them in the long term, is it not? Definition of long term is nebulous it seems and the extent to which it affects the short term seems to be dependent on all those other extraordinary measures and rules which the Fed enforces.
When he talks about Rb (FFR) and the tools to control it, or not, what does he mean by outlawing lending? The FFR is an interbank lending rate so does he mean outlawing banks lending to each other or is he talking about outlawing lending to consumers? Nick seems to have very strange ideas about what banks do.
I must confess to not really getting what Nick or Sumner mean when they discuss MOA or MOE.
" because to an MMer, all you need to do is offset any nominal/monetary shocks to AD by adjusting the AD control, which could be Rm or it could be the quantity of base money"
Nick seems at odds to Moslers quote that a monopolist can control price or quantity of that which it has monopoly over but not both. His Rm is the price and monetary base is the quantity. He seems to think they can control both at the same time.
I think to both Nick and Sumner, MOA = base money = cash in circulation + bank reserves (vault cash + electronic).
DeleteSo the basic idea is that a change in the supply or demand for MOA wouldn't make any difference to the economy (except for the MOA markets itself) if there were no sticky wages or prices. The reason is because the MOA price is special: it's fixed at unity by definition, so if supply or demand change for MOA then all other prices in the economy for all other goods and services would simply change instantaneously to reflect this. Thus if your MOA is gold, for example, then the value of gold changes (the gold market changes), but the relative prices of all other goods and services is preserved.
Now add in stick prices and wages. Now a change in the supply or demand of MOA is still neutral but only in the long term. In the near term all other prices in the economy do not change instantaneously, and instead a log of (potentially harmful) transients are introduced until they do change. Those transients include temporary changes in productivity, employment, interest rates, etc.
So in the MM universe, if an exogenous demand shock occurs which causes demand for MOA to spike, in order to avoid a recession the smart CB will offset this shock to avoid all those harmful transients which will occur because of sticky wages & prices. So for example, in the gold standard world, if the demand for gold doubles, the CB should devalue the money by half: if currently $1 = 1 oz, then the CB should revalue the currency as $1 = 0.5 oz: This instantaneously offsets the shock and thus the recession is avoided. Mind you this recession (narrowly avoided) had nothing to do with any structural problems or fundamental aspects of the economy: it would have happened only because of the shock and the weirdness of money (the MOA being "money" here).
So now back to Nick's world with Rm and Rb. (Rm is not really IOR since it is a universal deposit rate, and I'm not sure there's any cash in this world either). In this world, where quantity of base money is not controlled, then Rm takes on the role of being the CB's handle on demand for MOA. Thus if a nominal shock occurs to demand for MOA which might cause an unnecessary recession, the CB should offset the shock by adjusting Rm. Rb doesn't matter for this. And by outlaw, yes he means outlaw as in Islamic law: get rid of lending altogether (which means the CB now has to supply all the money) (see my comments and Nick's reply at the bottom of the page).
... if Rm isn't set exactly right to offset the shock, then there will still be this long range macroeconomic pressure for all other prices in the economy to adjust to the new relative value of MOA... and that long term pressure combined with sticky wages & prices is what causes harmful transients.
DeleteThe good news is that Rm can be changed instantaneously to attempt to do this shock offsetting. If all goes well, the shock will only cause a disturbance in the MOA market but all else should be relatively unaffected. What's it mean to cause a disturbance in the MOA market when you have fiat money? Nothing really... that only makes sense if the MOA is some commodity like gold. Or maybe you could interpret it in terms of **real** (not nominal) lending or deposit rates on the MOA. I don't know, I haven't thought it through much.
... so I think MMs see themselves as prescribing a means by which monetary policy can undo the effects of sticky wages and prices combined with nominal shocks: they see themselves as trying to neutralize the weirdness of money. This doesn't help too much with anything else driving the economy, and I think they realize that.
DeleteNow they might be totally wrong about how things work in the real world... but I think their intentions are good here: the real goal is to neutralize the weirdness of money and nothing more. That's how I see it anyway.
I liked my "good monetary policy should be focused on neutralizing the weirdness of money" slogan so much that I decided to ask Nick if that was a fair description:
Deletehttp://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a73d7572a1970d#comment-6a00d83451688169e201a73d7572a1970d
Hopefully I'll get a response. :D
Another way to look at what I mean by "weirdness of money" is that these nominal shocks to MOA demand would not cause these harmful transients if there was no MOA (i.e. if we had a barter economy). If the value of gold doubles (all else being equal) in a barter economy, then instead of 1 oz = 1 chicken, then 1 oz = 2 chickens. 1 chicken = 1 duck remains unchanged (but of course 1 oz goes from 1 duck to 2 ducks as well). Only the gold market is affected instantaneously: all other relative prices remain unchanged, and there are no weird transients, and sticky wages and prices don't matter.
DeleteUpdate: I did get a response from Rowe. He preferred this statement:
Delete"...the goal of good monetary policy is to try to make Say's Law true."
Very clear and succinct. That implies that Say's Law isn't necessarily true... and that it requires good monetary policy in order to approach that ideal. I'd expressed the same sentiment (as a test... to see if I was getting MM ideas correctly) to David Glasner, but he'd admonished me for dragging Say's Law into it. To be certain, my question to David was clumsier and I may have confused him and myself in the process... but still on re-reading it, I detect a definite difference of opinion there between Rowe and Glasner. It'll be interesting to see if either of them has more to say on the subject.
Not to leave anyone out, I posted Nick's quote above on pragcap Forums as a question, and yet a different version of my original question to Nick for JP Koning. I'm very interested to get down to the core idea of what people think monetary policy **should** do. I have to say, Nick sure makes this concept easy!
A lot to chew on there Tom. Monetarists it seems to me really want to eliminate money as a factor and simply view the economy as if pure barter were going on, which of course is when Says law is true.
DeleteIf barter were all that was going on underneath this money veil there is no way we could have the inequalities we do. Barter requires that something of equal value be exchanged so it can never make you better off than your trading partner.
Greg a barter economy would be a very unpleasant and frustrating place I'm guessing. Basically Tom, Monetarists believe that the weirdness of money is responsible for the business cycle?
DeleteI still don't think they come by this postion wholly innocently. I see Monetarism as basically a kind of conservative sop. After Keynes conservatives desparately wanted to 'crush the infamous thing' but no 'stake' would work-to use Sumner's own imagery.
DeleteMonetarism was different in that unlike other conservative schools it doesn't deny demand side recessions. However, it insists on a purely monetary theory of depressions to avoid the infamous thing-fiscal stimulus.
Greg, if we accept Nick's take for a moment, then he says the best we can hope for is to try to make Say's Law true, right? That implies that it's not true most of the time, so viewing the economy like barter would be false: that is the ideal, not where we are now. Do you agree?
DeleteAs I put it to JP Koning (we'll see what he thinks), good monetary policy according to MM, would give us the best of a monetary and a barter economy: it would relieve trade from requiring a coincidence of wants (a good property of money) but also avoid uncompensated demand shocks to the MOA (a property that barter has naturally, since there's no MOA). So good monetary policy gives you the best of both worlds: but it certainly doesn't solve all our problems. We'll see what JP says to that (I'm a bit surprised at the Rowe/Glasner disconnect over Say's Law, so this should be interesting).
""...the goal of good monetary policy is to try to make Say's Law true."
DeleteTom this is exactly what I'm always saying. Sumner wants to make the RBC business cycle true, Nick wants to make SL true.
This is the difference between Monetarism and other economic conservatives. Conservatives say Say's Law is true. Monetarists say it's false but the point is to make it true.
Mike, well... if you read Nick's response to me, he wasn't happy with my "weirdness" characterization. What he suggested as a replacement was much cleaner. Probably rather than "weirdness" I should have used the term "drawbacks." Perhaps he would have been happier if I'd said that good monetary policy attempts to neutralize the drawbacks of using money, while maintaining the advantages of money.
DeleteMike, I can accept that their (or at least Nick's) idea is to make Say's Law true. I should really go refresh myself on Say's Law before I say something too stupid, but at one time I thought I understood it... which was why I was a little surprised that Glasner didn't think SL had anything to do with the goal of MM: I think I said to Glasner basically the same thing that Nick said to me (only it was buried in a lot of other words, and even then the kernal of it was clumsily stated).
DeleteMy concept of SL is that it would normally require a barter type economy: it's the "you don't produce, then you don't eat" kind of philosophy... and moreover, you'd better produce stuff that other people are interested in having if you hope to obtain some of their stuff in return: i.e. you'd better make yourself useful. That's my concept of Say's Law. To think that things are like that now is a bit crazy, so I'm with Nick on that part of it. But I also have to admit that the concept sounds fair enough... I don't see a huge problem with it. Of course it should be modified to make it more humane, but the general concept doesn't sound that objectionable to me. But maybe that's because I'm not understanding SL correctly!
Regarding the drawbacks of money being responsible for the business cycle: no, I think the drawbacks are only responsible for the unnecessary parts of the business cycle. Sumner says booms and busts exist (unlike bubbles), and monetary policy won't help with those. (Sumner would say monetary policy won't help with bubbles either, because of course those don't exist).
Delete
DeleteMike,
I never meant to suggest that barter was not an unpleasant place to be. My point has always been that if money is simply a veil over a barter economy (the neoclassical and monetarist positions I believe), the veil isn't neutral. If one thinks we can just remove money and understand how everything got to be distributed the way it did, then barter isn't the model to look at. Barter is an equal exchange which makes neither party better off (or makes each party equally better off). So something other than barter is going on. There is a power imbalance that gets perpetuated and requires some people to give up way more (the 90%) than they get. I would argue its the private credit money that perpetuates and exacerbates this hierarchy of power. And CBs act on behalf of private banks first and foremost.
We do not have a barter economy under this veil of money and we never have. At least not once we started getting economies larger than hundreds of thousands of people and multiple geographic areas.
"Greg, if we accept Nick's take for a moment, then he says the best we can hope for is to try to make Say's Law true, right? That implies that it's not true most of the time, so viewing the economy like barter would be false: that is the ideal, not where we are now. Do you agree?"
Well the economy as barter is only an ideal if you believe in an unstratified economy. Barter is an equal trade. Capitalism results in profits. There are no profits in barter. So I can't say I agree. Trying to create the conditions that make a barter economy "true" or "ideal" is not possible in a capitalist world. Its not possible in any world really, but I don't see that as a reasonable goal of CBs and their monetary policy. CBs serve private banks, private banks serve profit, profit is incongruous with barter, no CB policy can get us closer to barter.
Yes that's another point Greg touched on Tom. MMers think the Fed can basically just wave a wand and we have any level of inflation you want. It's arguable that the Fed has little power over the rate of inlfation
ReplyDeleteYou should ask Nick Rowe about that. He's got what he thinks is a good example in Canada, since the BoC is focused only on maintaining its IT: no dual mandate there, and he claims they've been very successful at it. When it looked like they were going to undershoot their 2% target a few years back, they did a small amount of QE, made their intentions crystal clear (i.e. did a Chuck Norris) and recovered again w/o the dramatic build up in the BoC's BS that the Fed experienced. I'd try to find that for you, but it was in a comment some months back. It's worth asking him about though... I'd be interested to confirm I got the story right.
DeleteHe says that focusing on a single goal (IT of 2%) helps them achieve their objective more efficiently.
So, maybe one example out of 200 some nations on Earth... Ha.
(Australia might have a similar story if I recall correctly, actually).
re: post by Glasner on sticky wages: Krugman, Simon Wren Louis and Roger Farmer all did posts on that now. Morgan Warstler gave me the heads up.
ReplyDelete... and now Glasner responds to Krugman and Farmer.
DeleteIn other news, as you know I like to keep up with Vincent Cate the hyperinflationist. I shared with him Nick Rowe's pronouncement above about good monetary policy trying to make Say's Law true. Well Vincent fired back like this:
"If you outlaw fractional reserve banking (bank must sell 10 year bonds to get money for 10 year loans) and use gold and silver coins, Say's law would be true."
So then I launched into my very own Rowe-vanesque rendition of an economics story. I thought you might like it because it ties into what I was discussing above (plus it involves chickens & ducks!... sorry, no apples & bananas... or cows).
howfiatdies.blogspot.com/2014/02/phillips-curve-fallacy.html?showComment=1392167218287#c7105194601164056607-
In all honesty, I don't know if I buy the MM story 100%, but it's an easy one to understand. And compared to Vincent's advice about how to preserve Say's Law, I think the MM story is much better!
... and Sadowski enters the Fray too (on sticky wages): he backs Glasner "100%" on this.
DeleteHowever, Tom I got to point out to you-they both want Say's Law. Again, more agreement than on the surface.
ReplyDeleteOK, but what's wrong with wanting to make Say's Law true? ... provided we can add a humanitarian aspect to it anyway (I don't want to see the disabled starve face down in the gutter because they're not producing).
DeleteThe reason they want it to be true is to drown the govt in the bathtub and dance on Keynes' grave. SL is the excuse for Right wing fiscal policies. It's the whole enchilada. If you want to see the big differene between Keynesian and Pre-Keyensian econ it's that the latter is all about Say's Law.
DeleteI think I'll ask Nick if he wants to "drown the govt in the bathtub and dance on Keynes' grave." :D
DeleteWell, OK, I'm very much in danger of saying something stupid now... I've been avoiding re-reading the wiki article on Say's Law... however, isn't it true that the big complaint about Say's Law is not that it is something to shoot for, but it's that assuming it's true to start off with is wrong?
In other words, if I wrongly assume that Says Law is true (perhaps as the old-timey right wingers did back in Keynes' day), then I will be in danger of making wrong policy decisions because I'll assume the demand side can't possibly be the problem (after all, Say's Law is true dag nab it!).
If, however, I acknowledge the demand side in creating my monetary policy (and maybe fiscal policy too), in an attempt to move the economy to a state in which Say's Law is closer to being true, that's a very different thing isn't it?
If you acknowledge up front that staying as close as possible to a "Say's Law is true" world implies that you have to pay attention to the demand side to get there, I don't see what the problem is: Keynes' grave remains undanced upon, and the government is still breathing.
OK Mike, I couldn't resist: I saw that Nick had just blessed my Row-vian story to Vincent, so I did what I threatened above:
Deletehttp://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a73d75d333970d#comment-6a00d83451688169e201a73d75d333970d
Mike, after Nick mentioned that he thought he'd gotten that quote about Say's Law from Brad DeLong, that sent me off on a quest to see if I could find something like that on Brad DeLong's site. Well, this might not be the best example, but it comes close:
Delete"Now there was an economic theory that held that fluctuations in unemployment and capacity utilization were logically impossible: that supply was automatically equal to demand. That theory is called "Say's Law," after nineteenth-century French economist Jean-Baptiste Say. That theory wrong: there are fluctuations in unemployment and capacity utilization. And because that theory is wrong, we have the Federal Reserve. One way to think about the Federal Reserve's mission is that it's job is to try to make sure that spending is matched to production--to make Say's Law true in practice, even though it is not true in theory."
http://delong.typepad.com/sdj/2005/08/national_review.html
... I went ahead and asked Brad too in his latest post, so we'll see if he answers. :D
Nick, I hope you've come over here to read this stuff... I'm reluctant to keep polluting your comments section w/ off topic comments (but I'm sure Mike is OK with it, right Mike? :D). It seems this is a common thing that Brad DeLong says:
Delete"It is important to get aggregate demand right--for the government to create the right amount of safe and of liquid assets to match shifting private sector demand and so make Say's Law true in practice if not in theory--so that the problems economic policy is dealing with are Harberger Triangles and not Okun Gaps."
Here's one example:
http://delong.typepad.com/delong_long_form/2013/09/but-we-must-do-the-wrong-thing-understanding-the-economic-arguments-against-dealing-with-global-warming.html
"Harberger Triangles and not Okun Gaps?" ... Nick? What's that mean?
Actually that "true in practice" quote shows up a lot. Here's the result of doing a site search for "Say's Law true" on his site:
https://www.google.com/search?safe=off&q=site%3Ahttp%3A%2F%2Fdelong.typepad.com%2F+%22Say%27s+Law+true%22&oq=site%3Ahttp%3A%2F%2Fdelong.typepad.com%2F+%22Say%27s+Law+true%22&gs_l=serp.12...520915.537286.0.539924.17.12.5.0.0.0.287.1601.2j9j1.12.0.ernk_timepromotiona...0...1.1.35.serp..17.0.0.TS_i010feZI
That last URL is a huge. Try this convenient hyperlink instead
Delete"If you acknowledge up front that staying as close as possible to a "Say's Law is true" world implies that you have to pay attention to the demand side to get there, I don't see what the problem is: Keynes' grave remains undanced upon, and the government is still breathing."
ReplyDeleteWell don't ell Sumner that it will really disappoint him. He's written so many posts about the 'death knell' of Keynes, the grave of Keynes, driving another stake through Keynesianism.
One reading of Keynes-mostly via post Keynesians-is that there's no possibility of a permanent stability in a capitalist economy-ie, the demand side will never be wholly solved once and for all, it can only be dealt with temporarily.
Remember back in 2003 when Bernanke and others were declaring the business cycle solved once and for all? So I see declaring SL true as dangerous and leading to bad policy-'the demand side is now fixed' all we have to do is fix the structural problems-scale back the govt. cut union workers' wages, and cut taxes for the rich and maybe raise them for the poor-ie, a consumption tax-and everything will be fine.
Mike, you should go check out Nick's responses on his blog.
DeleteNick says not only DeLong but he believes Keynes himself used to make such statements about Say's Law. Nick was not surprised that Glasner didn't agree and in fact expected Scott wouldn't agree (I let him know he was wrong on that last count).
DeleteI started reading some of those DeLong links (from my link to the google site search I gave you above). Pretty interesting stuff. I think the distinction DeLong makes between theory and practice is crucial: essentially saying that it'd be nice if we could arrange things so that Say's Law appears to be true (when we all know there's no fundamental force compelling it to be true).
And assuming we could do that, I don't think that necessarily means we then take a neo-liberal axe to government: all it means is ... well, see that DeLong quote about triangles and gaps... I did a little wikipedia reading on that... and Nick provided some references, but I'm not there yet! -- I'll go out on a limb though and say that it might mean we can work on "structural changes" ... which could mean "build more useful highways and bridges -- not make work projects, but actual useful stuff that will bring down costs for businesses and commerce."
"And assuming we could do that, I don't think that necessarily means we then take a neo-liberal axe to government: all it means is "
ReplyDeleteIf Sumner's plan to drive a stake through Keynesianism is successful it will mean we take an axe. That's my point-the endgame to all Monetarism is taking the axe.
Tom maybe you can explain this as you seem to always come up with the most benign explanation for everything Sumner says. What does it mean when he talks about driving a stake through the heart of Keynesianism? Why does he say such polemical things if he has no agenda beyond NGDPLT?
ReplyDelete